Background

When it announced the introduction of a Resource Super Profits Tax (RSPT) in May 2010, the Government directly linked the revenue from the tax to a number of expense measures including funding the income tax forgone from lifting the superannuation guarantee from 9 per cent to 12 per cent and the introduction of a $500 low income superannuation contribution (LISC) for those earning $37,000 or less to compensate for the 15 per cent superannuation contributions tax paid.[1]

Following a period of consultation in the second half of 2010 and negotiations in early 2011 between the Government and some mining companies the proposed RSPT was modified to what became the Minerals Resource Rent Tax (MRRT), with the linked measures retained. Of course there is no practical hypothecation of MRRT revenue to linked measures.[2] While legislation that has been passed by the Parliament to implement some measures was dependent on the passage of the MRRT legislation, future revenues and expenses are simply put through the Consolidated Fund.

As part of the 2012–13 Budget, the Government revised its revenue estimates for the MRRT and announced that several linked measures would be deferred or abandoned. The Parliamentary Library estimated that the combined impact of these revised revenue estimates and changes to measures notionally funded by the MRRT were an overall impact on the budget of – $43 million in 2011–12, +$2,068 million in 2012–13 and – $619 million in 2013–14.[3]

The 2013–14 Budget has also seen further revisions to MRRT revenue and some changes to linked expenditures. So what is the overall impact taking into account further revisions to revenue estimates and 2013–14 Budget announcements relating to measures linked to the MRRT?

MRRT revenues

Estimates of revenue raised by the MRRT have been revised down several times since the introduction of the MRRT-related Bills in Parliament in November 2011. The Treasurer revealed on 8 February 2013 that revenue from the MRRT was only $126 million over the first two quarters of 2012–13,[4] so it is perhaps no surprise that revenue for the full 2012–13 financial year is only expected to be $200 million, $1.8 billion less than at October 2012 (Table 1).

Changes to MRRT-related expenses in the 2013–14 Budget

There were four changes announced in the 2013–14 Budget to measures that were linked to MRRT revenue:

the abandonment of a proposed increase to Family Tax Benefit Part A (FTB-A) from 1 July 2013

an increase in the concessional superannuation contributions cap from $25,000 per year to $35,000 per year for those aged 50 and over from 1 July 2014 with a start date of 1 July 2013 for those aged 60 and over[5]

a minor change to the LISC so that those with an entitlement below the $20 minimum receive at least $10 and

reduced funding for stream 2 of the Regional Infrastructure Fund (RIF) of $2 billion (with $1 billion of this relating to 2018–19 and 2019–20).[6]

Of these measures, the Government attributed the reduced allocation for the RIF to the change in revenue estimates for the MRRT, while the Government’s reasons for abandoning the increase in FTB-A referred to broader revenue write downs.[7] The combined net gain to the budget as a result of these changes is almost $2.9 billion over the forward estimates (table 2):

Net impact of MRRT revenue and linked expenses

Taken as a package, the net cost of the MRRT and associated measures can be calculated for three financial years, 2011–12, 2012–13 and 2013–14. In these years, based on the latest revenue forecasts and the cost of associated measures, the net cost of the package is $43 million in 2011–12, $560 million in 2012–13 and $3,471 million in 2013–14 (table 3).

Higher superannuation caps for people aged 50 or more with a superannuation balance of less than $500 000

Original cost (f)

545

785

Not available

Not available

Impact of 2012–13 Budget

-580

-730

-130

-10

Impact of 2013–14 Budget

0.2

195.3

-104.9

-230.8

Instant asset write-off for small business ($5000 threshold)

Original cost (g)

1030

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

Legislated – no impact

Legislated – no impact

Legislated – no impact

Standard work-related deduction

Original cost (h)

410

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

Reduced to nil

Reduced to nil

Reduced to nil

Phasing down interest withholding tax on financial institutions

Original cost (i)

70

Not available

Impact of 2012–13 Budget and intervening policy announcements

-70

-70

Not yet legislated – no impact

50 per cent refund on tax paid on savings

Original cost (j)

470

480

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Regional Infrastructure Fund

Original cost

42

794

867

665

Impact of 2013–14 Budget and intervening policy announcements

No impact

No impact

-150

-50

No impact

Expanding the definition of exploration to include geothermal energy

Original cost

5

5

Impact of 2012–13 Budget and intervening policy announcements

No impact

No impact

No impact

No impact

No impact

Supplementary income support for low income earners

Original cost

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget and intervening policy announcements

153

299

306

313

Increase in the rate of Family Tax Benefit A

Original cost (k)

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget

603

615

626

Impact of 2013–14 Budget

-615.8

-623.3

-632

Tax loss carry-back

Original cost

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget and intervening policy announcements

150

250

300

Notes: Measures can be linked to the MRRT through a number of mechanisms, including the packaging of measures in the initial announcement of the RSPT and by subsequent announcements by Government members. Measures can also be linked to the MRRT if they were part of negotiations with non-Government parties and members in finalising the MRRT Bills for passage through the House of Representatives. The cost of measures does not include associated administrative costs that were allocated to agencies (a) Original cost as presented in the 2010–11 Budget and subsequently changed by the announcement on 2 July 2010 which changed the proposed cut to 29 per cent; (b) The early start for the small business company tax rate reduction to 28 per cent was amended to 29 per cent in the 2 July announcement. (c) Original estimates updated were updated in the Supplementary Explanatory Memorandum for the Bill to introduce the measure; (d) Original cost for this measure was to include increasing the age limit to 75. This was amended during the Bill’s passage through Parliament. Original costs were updated by Supplementary Explanatory Memorandum for the Bill and amended by the Revised Explanatory Memorandum; (e) Cost estimates as provided in the Explanatory Memorandum. The measure was refined in the November 2011 MYEFO to include additional income eligibility tests and a minimum $20 payment requirement. This was further modified in the 2013–14 Budget so as to introduce a $10 minimum payment requirement even where contributions are less than this amount. (f); This measure was deferred in the 2012–13 Budget by two years to commence from 1 July 2014. The measure was then revised in the 2013–14 Budget for a higher cap of $35,000 but without reference to total superannuation account balance (g) Cost of original proposal excluding the further increase to $6500 under the Clean Energy Future package; (h) Original cost amended in the November 2011 MYEFO by being deferred by 1 year; (i) Original proposal to commence from 2013-14 but deferred in November 2011 MYEFO to commence in 2014–15; (j) Original estimates updated by three subsequent policy changes until decision to abandon the proposal in the 2012–13 Budget; (k) Original cost for this measure as announced in the 2012–13 Budget. The measure was abandoned in the 2013–14 Budget.

[2]. Measures can be linked to the MRRT through a number of mechanisms, including the packaging of measures in the initial announcement of the RSPT and by subsequent announcements by Government members. Measures may also be linked to the MRRT if they were part of negotiations with non-Government parties and members in finalising the MRRT Bills for passage through the House of Representatives.

[5]. The impact of increasing the concessional contributions cap to $35,000 for those aged 50 and over reflects the incremental adjustments from previous budget announcements rather than the full cost of this policy. The higher cap was originally included in the 2010–11 Budget for those aged 50 or more with a superannuation balance of less than $500,000 from 1 July 2012. This measure was then deferred two years in the 2012–13 Budget. As a result, the 2013–14 Budget impact reflects the change in timing for those aged 60 or more (July 2013 rather than July 2014), change to the cap ($50,00 down to $35,000) and the broadening of the measure (all persons aged 50 or more regardless of accumulated superannuation account balance).

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